Betterment tops $1.3 billion valuation with latest funding

Independent digital investment adviser Betterment announced Wednesday it has secured $160 million in growth capital, its largest capital round to date that has pushed the fintech’s valuation to $1.3 billion. 

The extra capital consists of a $60 million Series F equity round and a $100 million credit facility, according to the announcement. The additional funding will be used to accelerate Betterment’s business-to-business arms, particularly its growing 401(k) offering for small- and medium-sized businesses, said chief financial officer Peter Lorimer in an interview. 

“The evolution of our strategy is [in] to this multi-prong distribution model,” Lorimer said. “The small business 401(k) product is extremely underserved. There are 6 million small- and medium-sized businesses out there and only 10% have retirement solutions for their employees.” 

Betterment sees an opportunity to power 401(k) products for these businesses, he said. As for Betterment for Advisors, the robo is aiming to continue to customize offerings for advisers where they see momentum, specifically with socially responsible investing products, Lorimer said. 

“We want to allow our customers to interject their own preferences and values into the investment offerings they have today,” he said. 

Betterment's push to expand across multiple business lines has led to the robo-adviser’s  skyrocketing gains. To date, Betterment manages $32 billion in assets with nearly 700,000 users, said Lorimer. 

Under its founder and former CEO Jon Stein, who stepped down as CEO last year, Betterment entered the business-to-business space with the launch of both its 401(k) arm, Betterment for Business, and adviser services platform, Betterment for Advisors, in addition to the company’s retail offering. 

Betterment has made it clear under the leadership of new CEO Sarah Levy, who took over in December, that it is prioritizing the growth of its adviser business, and the platform has been busy rolling out new offerings since. 

In March, Betterment 401(k) signed partnership deals with Zenefits and Bennie, making its 401(k) offering available to a larger customer base.

For its adviser business, Betterment tapped RIA in a Box, RightCapital and Wealthbox to provide new and breakaway RIAs with a predetermined tech stack, the company announced in June. 

Betterment’s RIA Tech Suite launched one month after Betterment kicked off its mission to rapidly grow its adviser-focused business line throughout the year with the roll out of Co-Pilot, a command center that aggregates a to-do list of client needs an adviser should address.

Betterment for Advisors launched custom model portfolios in February, where advisers have the ability to build their own custom model portfolios of exchange-traded funds, at no additional cost, while leveraging Betterment’s portfolio management tools, including automated rebalancing, tax-loss harvesting, asset location and tax-optimized sales for withdrawals.